I would advocate moving the GSEs out of No Man’s Land. Events haveshown how difficult it is to balance financial, capital, market, housing,shareholder, bondholder, homeowner, private, and public interests in acrisis of these proportions. We should examine whether the economy andthe markets are better served by fully private or fully public GSEs.

—DANIEL MUDD, 2008

Organization played a major role in the financial crisis. A firm’s organization
defines the rules by which it must operate. Managers either work within
those rules to create favorable circumstances or change their organizational
status. Changes in organizational form occurred before the crisis, for example, when Wall Street firms converted from partnerships into investorowned companies, and during the crisis when Goldman Sachs and Morgan
Stanley converted into bank holding companies backed and supervised by
the Federal Reserve.

This chapter considers first the formal structure of various types of financial
firm and then implications for the business models that these firms adopted
before the crisis. Among the most important business models were portfolio
lending, popularly known as the storage business, and transaction-based finance,
popularly known as the moving business.

From an organizational perspective, competition among financial firms
takes place on anything but a level playing field. Three major factors are (1) a
firm’s size and complexity, (2) the charter or other legal framework under
which it operates, and (3) whether it is a partnership or investor-owned.

Print this page

While we understand printed pages are helpful to our users, this limitation is necessary
to help protect our publishers' copyrighted material and prevent its unlawful distribution.
We are sorry for any inconvenience.